SEG International’s (SEGi) FY11 core earnings of RM72.3m
were in line with both our and consensus forecasts, making up 95.3% and
98.4% of the respective
projections. Being one of the largest
private education players in Malaysia with 30k students on board, we continue
to like SEGi for its diversified course offering and established balance
sheet that is premised on an asset-light
model. Hence, maintain BUY at a revised FV of RM2.17 based on an unchanged 18x
FY12 PER.
Within expectations.
SEGi’s FY11 revenue came in 27.9% higher y-o-y at RM278.3m due to higher
student enrolment, which we estimate to have risen from 21k to 30k as of Dec
2011. Correspondingly, the EBITDA margin widened 300bps to 31.9% on improved
economies of scale as enrolment growth outpaced the marginal increase in opex.
Lower financing costs and a more favourable effective tax rate helped lift FY11
core earnings to RM72.3m, which surged over 67.9% y-o-y. On a quarterly basis,
4QFY11 results were generally up y-o-y
on higher student enrolment but recorded a slight dip sequentially due to
expenses incurred in upgrading its campuses during the quarter.
Cash pile of RM87.2m. Although the company did not declare any
dividends for the quarter, we continue to see potential for a bumper dividend
given its sturdy cash pile of RM87.2m as of Dec 2011 (which translates into a
net cash per share of 14.0 sen based on
the current share capital) as
well as its strong operating cash flow estimated at >RM100m p.a. for both
FY12 and FY13. Should its remaining 189.7m outstanding warrants which are
currently trading at a slight discount of 1.5% be exercised, this will
translate into an extra cash coffer of RM94.8m at the exercise price of
RM0.50/share. In our model, we assume a staggered conversion with an average
63.2m warrants converted per year from FY12 to FY14.
BUY. We make no
major changes to our core assumptions for now, with our FY12 core earnings
forecast revised upward marginally by 0.5% to RM90.2m for book-keeping purposes
following its full-year results release. We also take the opportunity to
introduce our FY13 forecasts, with the net profit estimate coming in at
RM99.6m. Maintain BUY with our FV now revised to RM2.17 based on an unchanged 18x
FY12 PER and a fully enlarged share base of 748.4m shares upon the conversion of
all outstanding warrants.
Source: OSK188
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